Income taxes

Last reviewed 09 Mar 2023

Tax rate

10 % – standard rate;

Starting 2023, personal allowances include a base personal deduction and an additional personal deduction and are granted up to the limit of the monthly taxable salary.

The base personal deduction is granted in 2023 on a monthly basis to employees having a gross salary of max. RON 5,000 (app. EUR 1,000). The base personal deduction varies between 0% - 45%, depending on the level of the salary and the number of persons under employee's care.

Additional personal deductions are available monthly, in 2023, as follows: (i) 15% of the minimum gross salary per economy (RON 3,000, i.e. EUR 600 per month) - for employees younger than 26, who earn a salary of max. RON 5,000; (ii) RON 100 for each child up to the age of 18, who is enrolled in an educational system - granted to one of the parents.

Certain types of salary income are exempt: salary income of software developers, constructions workers, agricultural workers and employees in R&D; allowances etc.

Certain types of salary benefits are non-taxable up to a monthly threshold of 33% on the base salary: cost of food provided by employers, voluntary pension contributions (capped at EUR 400/year), voluntary medical insurance or subscription (capped at EUR 400/year), sports membership (capped at EUR 400/year - as from February 2023), allowance for teleworking (capped at RON 400/month, i.e. app. EUR 80).

Special tax rates

8% for dividend income
1% or 3% for income from the transfer of immovable property
Tax rates of 3% - 40% for gambling income, depending on income thresholds

Tax liability

Unlimited

On worldwide income of persons resident in Romania for tax purposes. Any person satisfying one of the following conditions is considered a resident:
■ place of residence in Romania
■ centre of vital interests in Romania
■ presence in Romania for more than 183 days during any period of 12 consecutive months.

Foreign individuals having their centre of vital interests in Romania, or who are present in Romania for more than 183 days during any period of 12 consecutive months, are subject to tax in Romania on their worldwide income.

Limited

For non-resident individuals, on their Romanian source income.

Tax assessment period

Calendar year

Income categories

Income from:

1. Employment
2. Self-employment (no personal allowance)
3. Transfer of rights to use assets
4. Pensions in excess of RON 2,000 (approx. EUR 410).
5. Agriculture, forestry and fish farming
6. Prizes and income obtained from gambling activities
7. Investments
8. Real estate transactions
9. Intelectual property
10. Other (including income earned from the transfer of cryptocurrencies)

Accounting

Generally, cash-based accounting as provided in Accounting Act. Freelancers may also opt to apply the double-entry bookkeeping system.

Loss set-offs

Within individual income categories.

Loss carryback

Not possible

Loss carryforward

Losses from self-employment, transfer of rights to use assets, agricultural activities, forestry and fish farming can be carried forward and set off for 7 years.
There is no limit to the amounts that may be carried forward and set off.

Operating expenses

Expenses incurred to procure, secure or maintain business income.

Tax allowable expenses

Operating expenses, interest

Lump sum option

Lump sum deduction of 40% of income from intellectual property rights (including income from creating monumental art works).

For certain types of self-employment commercial activities (e.g. supply of certain IT services), the tax may be computed based on an annual lump sum income, as provided by law.

Motor vehicles

Depreciation over 4–6 years.

Acquisition cost: no ceiling.

Expenses (including non-deductible VAT) incurred for vehicles that have a maximum weight of 3,500 kg and no more than nine seats, that are used exclusively for business purposes or for certain types of activities (e.g. emergency services, cab services, driving schools etc.) are fully deductible for income tax purposes. Other- wise, these expenses are only 50 % deductible for income tax purposes.

Social insurance

Deductible for salary income.

Withholding tax

Generally 10% income tax (exception: 8% for dividends).

Interest

Generally 10%; exception: 0% for interest on savings of natural persons domiciled in EU countries with which Romania concluded information exchange agreements.

In case of foreign tax resident individuals, the domestic rate may be reduced under DTA.

Royalties

Generally 10%. In case of foreign tax resident individuals, the domestic rate may be reduced under DTA.

Dividends

Typically 8% (DTAs can provide for lower rates in case of foreign tax resident individuals).